The drive for homeowner association protection laws

Eric Schultz / The Huntsville TimesEmpty lots and vacant houses make up most of the Legendwood subdivision in Madison. Homeowners have been trying to strengthen consumer laws protecting homeowners in associations, particularly when the builder goes under financially.It’s one of the worst nightmares imaginable for a homeowner: moving into a dream subdivision with a clubhouse and value-adding covenants, only to see them vanish.

A story Sunday by Times staff writer Gina Hannah expanding on a Times report in August reveals that Alabama has essentially no consumer protection laws for residents of homeowner associations.

Some homebuyers in the Monrovia-area found that out the hard way. Shortly after they moved into the Hidden Creek subdivision, a “for sale” sign went up outside the clubhouse and pool. A bank had foreclosed on the property when the developer reneged on property taxes and a $400,000 mortgage on the property even though the residents dutifully paid their association dues.

A similar nightmare unfolded for residents of the unfinished Laurenwood Preserve subdivision off Capshaw Road. The subdivision’s original builder filed for bankruptcy, leading to a discovery that homeowner association dues for upkeep of the clubhouse, pool and common areas were diverted when the bank assumed the subdivision and transferred control to a new development company. Laurenwood residents are now worried that less restrictive covenants imposed by the new developer – smaller square footage minimums, cheaper building requirements and lax landscaping mandates – will lower their property values.

Huntsville area homeowners, some Realtors and local elected officials are rallying for stronger consumer protection laws for subdivision homeowner associations. They’ve hired an attorney and are calling themselves Alabama Concerned Homeowners Alliance. A meeting is scheduled Sept. 29 at 6:30 p.m. in the Madison City Council chambers.

Organizers would like to see the law: provide homeowners the right to know how their dues are being spent; require such funds to be held in a bank account separate from the builder’s other assets; provide financial information about the development’s common areas, including liens, unpaid judgments or mortgages on the property; establish guidelines for conveyance of property when subdivisions are completed; and perhaps require background checks and licensing for those who manage homeowners associations.

Bill Watts, a Birmingham Realtor who serves on the Alabama Real Estate Licensing Commission, said many states have regulations over homeowners associations. “Alabama just happens to have essentially none at all,” he told The Times.

That’s unacceptable.

Residents have a reasonable expectation for protection in homeowners associations. They deserve accountability with their dues and assurances that restrictive covenants – covenants they relied on when making perhaps the biggest purchase of their lifetime – are enforced and remain consistent.

Proponents could face an uphill battle. Development and building investment interests are a powerful force in Montgomery. That clout was evident when lawmakers tried to push tougher landlord-tenant regulations to protect renters, and when stronger building regulations that could drive up costs have been pursued.

There’s a fairness issue, too, for developers and homeowner associations that play by the rules.